Apple has offered to buy the augmented-reality startup Leap
Motion multiple times, most recently in the spring of 2018.

Insiders said the figure discussed was between $30 million
and $50 million, a fraction of the company's Series B valuation
of $306 million. But negotiations fell through just days before
the deal was to be closed, according to people familiar with the
matter.

People familiar with Leap Motion said Apple's latest offer
might have been the last opportunity for Leap Motion to sell a
business that for years has teetered amid financial instability.

In late spring, employees of the augmented-reality startup Leap
Motion were celebrating. The company was on the verge of being
acquired by Apple, for what insiders said was a figure between
$30 million and $50 million.

Apple had already started talks with Leap Motion's
human-resources department to review company benefits and sent
offer letters enclosed in white folders emblazoned with its
silver signature logo - the arrival of which caused many
employees to high-five around the office.

But then, just days before the deal was expected to close,
Apple's offer mysteriously fell through, according to multiple
employees at Leap Motion at the time, who requested anonymity to
avoid retribution or other negative outcomes.

One insider described the deal's collapse as the result of
"swirling negatives" surrounding the company, and many cast blame
on its youthful cofounders, Michael Buckwald and David Holz.

At this point, however, Apple was familiar with the often
eccentric behavior of Leap Motion's founding duo - after all,
this was at least the second time in less than five years that
Apple had weighed an acquisition of Leap Motion, multiple people
familiar with the talks told Business Insider.

Not the first time

Leap Motion's first product.Kevin Smith/Business Insider

The first time Apple expressed
interest in buying the startup was about five years earlier, in
2013, when Leap Motion's cofounders met with the company to
discuss a sale.

But the meeting went poorly, multiple people said, when Holz, the
CTO and brilliant technical brain behind Leap Motion, said he had
no interest in joining Apple's team.

Not only did Holz seem uninterested in Apple's prospective offer
to acquire its team and intellectual property, the people said,
but he was insulting. He told Apple representatives the company
was no longer innovative, said its technology "sucked," and - to
the disbelief of many there - praised the virtues of Android.

"That's why the Apple thing didn't work out. David was like, 'I'm
never going to go work for those guys - they're the devil,'" a
person who worked for Leap Motion at the time said.

That was only the first misstep in a yearslong courtship, with
Apple expressing continued interest in acquiring Leap Motion
despite what appeared to be Holz's marked distaste for both
Apple's team and its technology.

Apple didn't respond to repeated requests for comment. But the
episode reveals Apple's continued interest in technologies it
could use for its
rumored augmented-reality glasses and software, as well as
what happens when a startup that was once highly valued lands on
the sales block.

"Leap Motion is frequently solicited for acquisition by larger
technology companies who realize the value of our team and the
crucial role of our technology and research to the future of
computing," a Leap Motion representative told Business Insider.

But many people familiar with Leap Motion described Apple's
latest offer as a last-ditch opportunity for Leap Motion to sell
a business that for years has teetered amid financial
instability.

Flying high

In 2013, Leap Motion was flying high. That January, it announced
a $30 million Series B funding round from top-tier firms
including Founders Fund and Highland Capital Partners.

Leap Motion had captured the imagination of the tech industry on
the strength of a demo video that garnered millions of views,
showing people interacting with a computer - even playing "Fruit
Ninja" - using only their hands and gestures.

The promise was that Leap Motion's algorithms could "replace the
mouse and keyboard" with a piece of hardware that could sense the
user's hands and fingers "with no visible lag time." The initial
product paired with Windows and Mac computers, cost $80,
and launched in July 2013.

At 25 years old, Leap Motion's cofounders were listed in
Forbes' "30 Under 30" list alongside tech luminaries like
Evan Spiegel, Tracy Chou, and Patrick Collison. They were revered
by many as a brilliant but eccentric duo: Holz, a former NASA
consultant, was the brains behind the project, while Buckwald, a
serial entrepreneur and fierce debater, brought the company's
business savvy as CEO.

The startup's A-list backing helped it gain wide retail
distribution for what was mostly a tool for developers. Leap
Motion's technology was embedded in an HP laptop,
its product was sold in Best Buy locations, and its leadership
could get meetings with anyone, including giants like Samsung and
SoftBank.

That's when Apple kicked the tires on Leap Motion. The tech giant
wasn't interested in Leap Motion's hardware, according to a
person familiar with the talks, but was instead looking to
acquire its team of "rock star" employees and intellectual
property.

But the talks didn't go anywhere. Years later, some of those
"rock stars" have joined Apple to work on augmented-reality
projects, former employees said.

Leap Motion had raised its Series B at a valuation of $306
million in late 2013,
according to PitchBook, but its founders told their team that
the fledgling startup was worth more - announcing that Leap
Motion was potentially even worth $1 billion, according to people
familiar with the matter, which would make it a unicorn.

Many people close to the company said the issues afflicting Leap
Motion were a case of poor management. Much of the company's
venture capital was spent on sleek office space in San
Francisco's pricey SoMa neighborhood, complete with tech industry
perks like beanbag chairs and daily lunches, as well as costly
engineering salaries.

That Leap Motion should fall upon dire financial straits when the
company's core technology had such great potential was described
by many as a failure that could have easily been avoided.

Bad negotiations

While it's unclear why Apple eventually declined to purchase Leap
Motion earlier this year, one theme is clear from Business
Insider's discussions with people with intimate knowledge of Leap
Motion: The founders ultimately thought it was more valuable than
the offers on the table.

One issue for the startup was revenue. Despite Leap Motion's
widespread availability and
coverage in the technology press, sales were underwhelming
and never enough to sustain a company, multiple former employees
told Business Insider.

But Leap Motion never received the entire $50 million, a person
familiar with the matter said. Instead, the deal was a $25
million infusion of cash, with an additional $25 million based on
performance goals, the person said. Representatives for JPMorgan
Asset Management and Leap Motion declined to comment.

It was a smart fit - Leap Motion's hand-tracking technology makes
sense as one of the ways that people can control AR and VR
goggles. On the surface, the North Star developer's kit competes
with Magic Leap One and Microsoft HoloLens. But the headset has
never been manufactured in volume, and it needs to be connected
by a cable to a desktop PC.

Earlier this year, it became clear that Leap Motion would not hit
the goals needed to unlock the second part of that funding,
multiple people familiar with the matter said. Scores of
employees have left the startup, which is now looking to cut
costs.

"Leap Motion has moved its main technology hub from SoMa to the
Financial District. Most of our team, however, is remote," a Leap
Motion representative told Business Insider in an email last
week.

It's unclear whether Apple is still interested in the company,
but Leap Motion has taken meetings with other so-called strategic
companies to explore the possibility of a deal, according to
people familiar with the startup. It's unclear whether talks with
potential acquirers are ongoing. Leap Motion is also exploring
uses for its technology with defense contractors.

The core underlying technology could be valuable. Leap Motion has
more than 100 patents and applications in its name,
according to Sqoop, and its hardware is still used in many
prototypes from startups seeking to build goggles or other
hardware that needs gesture support.

It increasingly looks as if Leap Motion's technology might end up
being bought as a hidden gem for a company looking to add its
hand-tracking technology to future smart-glasses products - but
only if it can get the founders on board with the deal.